Consumer Discretionary Drops -1.9% in Broad Selloff

On Tuesday, September 1, the Consumer Discretionary sector fell -1.9% on a cap-weighted basis, weighed down by its largest companies as only 14.9% of its stocks advanced. The sector's primary vehicle, an exchange-traded fund named the Consumer Discretionary Select Sector SPDR Fund (XLY), dropped -1.7% to close at $114.59. The sector lagged the broader market on a day when 4 of the 11 sectors rose. Across the market, equities faced pressure as rising bond yields and oil prices weighed on Wall Street. In broader asset moves, Brent crude rose 4.6% as the 10-year Treasury yield climbed to 4.79%.

The gap between the cap-weighted drop and the equal-weighted return of -1.3% shows that the largest companies drove the decline. Among the largest holdings in the group, Amazon fell 1.9%, while Norwegian Cruise Line Holdings Ltd (-4.3%) finished as the sector's weakest stock.

Positive moves were scarce across the sector. Retail and specialty names provided isolated gains, led by Best Buy Co. Inc (+3.1%) and Ulta Beauty Inc (+1.6%). These advances were not enough to counter the broad selling across the rest of the group. The down day extended a difficult stretch for the group, bringing XLY to a loss of -3.1% over the past month.

For investors using XLY to track the sector, the fund's quality profile is mixed. EasyAlpha grades each company against its industry peers. Within XLY, 42.5% of the fund's graded weight is in companies graded A or B. Companies graded A or B have stronger fundamentals, and historically they have carried a lower risk of large drawdowns than companies graded D or E. With $22.5 billion in assets and an expense ratio of 0.08%, the fund offers liquid and low-cost exposure, though that structure passes through the drawdown risks of its lower-tier holdings.